Modelling the local impacts of national social policies: A Microsimulation Approach

During the last decades the inequalities in the distribution of income and wealth in the UK have grown and led to an increasing socio-economic polarisation and dualism (Atkinson, 1996; Hills, 1996; Joseph Rowntree Foundation, 1995). Although average real incomes have grown significantly, at the bottom of the scale there has been little or no rise in real income. In contrast, top incomes have risen a great deal faster than the average. This led to the highest level of income inequality recorded in the UK since the war (Atkinson, 1996; Green, 1996; Joseph Rowntree Foundation, 1995). In this context, there is a growing need for effective area-based and social policies to tackle inequalities in the levels of affluence or quality of life as well as for novel methodologies to estimate or predict the socio-economic and spatial impacts of such policies. The aim of this paper is to provide a new framework for the analysis and the evaluation of national social policies at the small area level. In particular, the paper shows how microsimulation modelling can be employed to shed new light on the local impacts of major national policy changes such as taxes, regulations, government consumption, unemployment benefits, job seekers’ and housing allowances etc. Microsimulation modelling provides the possibility of defining the desired effects of economic and social policy, the instruments employed and also the structural changes of those affected by socio-economic policy measures (Krupp, 1986). This paper builds on traditional economic microsimulation frameworks by adding a geographical dimension. More specifically, it seeks to model national social policy impacts at a micro-spatial scale. First, microsimulation modelling is used to synthesise a household micropopulation geographical database for an entire city. GIS software is used to identify the size and spatial location of particular groups like the unskilled, low-waged, under-educated and lone-parents. In this manner, the paper presents a micro-spatial approach to estimating the degree of socio-economic polarisation. This micropopulation database has a wide range of demographic and socioeconomic attributes that are relevant to national social and economic policies and which play a major role in the determination of eligibility of households for various benefits and allowances. It then explores potential social policies and demonstrates how microsimulation modelling can be used to perform what-if social policy analysis at the small area level.